Treasuries Move To The Upside As Traders Digest Tax Reform Bill

(RTTNews) - After closing roughly flat for two consecutive sessions, treasuries moved to the upside over the course of the trading day on Thursday.

Bond prices moved higher in morning trading and managed to remain in positive territory as the day progressed. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 2.9 basis points to 2.347 percent.

The upward move shown by treasuries came as traders digested the details of the House Republican plan to cut taxes and reform the tax code.

After delaying the unveiling by a day, the tax-writing House Ways and Means Committee released a memo highlighting some of the provisions of their tax reform bill.

The bill would reduce the corporate tax rate to 20 percent from 35 percent and also make it easier and less costly for American businesses to bring home foreign earnings.

The proposed legislation also lowers individual tax rates for low and middle-income Americans to zero, 12 percent, 25 percent, and 35 percent while maintaining the 39.6 percent rate for high-income Americans.

While the memo said the bill eliminates special-interest deductions, the plan continues to allow people to write off the cost of state and local property taxes.

The bill also preserves the home mortgage interest deduction for existing mortgages, although the cap on the mortgage interest deduction for newly purchased homes was cut in half to $500,000.

The GOP said the plan also retains popular retirement savings options such as 401(k)s and Individual Retirement Accounts so Americans can continue to save for their future.

The bond markets closed before President Donald Trump announced his nominee as the next Federal Reserve Chair.

After the close, Trump announced the nomination of Fed Governor Jerome Powell to replace current Fed Chair Janet Yellen.

The nomination of Powell would purportedly provide continuity at the Fed, as he has previously supported Yellen's general direction in setting monetary policy.

On the U.S. economic front, the Labor Department released a report showing an unexpected drop in initial jobless claims in the week ended October 28th.

The report said initial jobless claims edged down to 229,000, a decrease of 5,000 from the previous week's revised level of 234,000. The dip surprised economists, who had expected jobless claims to inch up to 235,000.

A separate report from the Labor Department showed a bigger than expected increase in labor productivity in the third quarter, with output jumping by much more than hours worked.

The report said labor productivity surged up by 3.0 percent in the third quarter after climbing by 1.5 percent in the second quarter. Economists had expected production to increase by 2.4 percent.

The Labor Department also said unit labor costs rose by 0.5 percent in the third quarter after edging up by 0.3 percent in the second quarter. The uptick in costs matched economist estimates.

Meanwhile, traders were also digesting the Bank of England's decision to raise interest rates for the first time in over a decade.

The monthly jobs report is likely to be in the spotlight on Friday, with employment expected to jump by 312,000 jobs in October after unexpectedly dipping by 33,000 jobs in September. The unemployment rate is expected to hold at 4.2 percent.

The employment data is likely to overshadow separate reports on international trade, factory orders, and service sector activity.